Metcash still a target as Foodland spurns bid

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Foodland is refusing to rule out a counter-bid for Metcash after
describing its rival's hostile takeover bid for the Perth grocery
group as undervalued and full of risk.

In a letter to his shareholders, Foodland chairman Len Bleasel
again advised shareholders to take no action because Metcash was
trying to return Foodland's New Zealand operations to shareholders
without paying a premium for control.

Foodland managing director Trevor Coates also said shareholders
were increasingly worried there was no guarantee they would
participate in the "supposed value creation" of New Zealand because
they didn't have any voting rights.

"I think the consensus from shareholders is there is a lot of
risk for shareholders and there is a long way to go," Mr Coates
told the Herald on Friday.

In December, Metcash announced a scrip-and-cash offer for
Foodland, valuing the local operations at $846 million, while
spinning off the company's New Zealand supermarkets. Foodland's
target statement is expected in about two weeks.

Foodland has so far failed to elicit any other rival bids. Asked
if he had abandoned an earlier plan to launch a counter-bid for
Metcash, Mr Coates said: "Nothing has been abandoned at all. The
board is considering every possible option."

Metcash chief executive Andrew Reitzer on Friday dismissed
Foodland's criticism and said he had received very positive
feedback from Metcash and Foodland shareholders and those with a
foot in both camps.

"The market has already spoken, just look at the share prices,"
he said.

"What Foodland have not said in their letter is what would
happen to their share price if the bid disappears."

Foodland slipped 10c to $24.40 but remains well above its level
of $19.21 before the bid emerged in December.

Metcash edged up 1c to $3.41.

Perennial Value Management, which holds about 5 per cent of both
companies, agreed that Metcash's bid document was complicated but
said the offer remained compelling because it unlocked value in the
New Zealand business and kept Metcash's debt within reasonable
limits by offering scrip.

"We have not been telling Foodland we are disaffected with
Metcash," Perennial's Hugh Giddy said.

"Our inclination would be to accept the offer early."

Mr Giddy said he would be "distraught" if Foodland made a
counter-bid for Metcash.

"I don't believe they would be trading at $24 if they made a
counter-bid but this way round I make money out of both shares," he
said.